#Discussion: Is Bitcoin In A Bubble? Or Not?
A Bubble Indeed
Experts who claim that Bitcoin is in a bubble, provide the following reasons for their belief:
1- Bitcoin Price Has Increased Much Faster Than its Use
This indicates that the price increase is totally based on speculation. It is only the optimism of speculators that is driving the price up. No one is actually using Bitcoin. In short, Bitcoin's price has exceeded its intrinsic value. This is a well-known characteristic of bubbles.
2- Bitcoin Is Not Backed by Anyone
Bitcoin is not backed by any central bank or institution, whereas every currency is insured by a central bank. Without such an institution, no one is protecting Bitcoin from a dramatic crash. This makes Bitcoin so vulnerable.
3- Bitcoin's Value Is Imaginary
Bitcoin only has value because you think it does. There is no real value backing it up.
4- Bitcoin is Vulnerable To Hackers
The short history of the cryptocurrency is full of sad stories of people losing their money to hackers. Bitcoin will never acquire the trust of the masses.
5- The Governments Will Ban Bitcoin
Some of them already did ban it. Some will soon follow. This will prohibit mass adoption of Bitcoin. After that, traders will lose their optimism and start selling. Then, the market will crash.
6- Bitcoin is Mainly Used For Illegal Activities
It is a dark currency used in black markets. Most law-abiding people would never touch it.
Bitcoin Is Not A Bubble
Experts who are promoting Bitcoin claim that it is not in a bubble at all. It is rather undervalued and we are at the beginning of its price surge. The following is a summary of their reasoning:
Source
1- Bitcoin Is Decentralized
Bitcoin is free and wild. There is no central government controlling Bitcoin. No corrupt agency can manipulate it. With Bitcoin, you are in control of your money. So, Anyone worrying about financial crisis would refuge to Bitcoin.
2- Bitcoin's Supply Is Limited
Fiat currencies are printed by their controlling government. Whenever a government has financial problems, it resorts to the money printing press. This has caused endless inflation everywhere. It has devastated many countries like Venezuela and Zimbabwe. Bitcoin is not like that, luckily. It has a very limited supply and the newly printed bitcoins is decreasing. This makes Bitcoin an excellent store of value.
3- Bitcoin Is Just Starting
Most people do not know what Bitcoin is. The public awareness of Bitcoin and its adoption is just starting. Yet, it is increasing exponentially. Add that to the limited supply and you would get a formula saying that Bitcoin's price will only increase by time. Obviously, this makes Bitcoin an excellent investment.
4- Bitcoin Is Secure
You can not counterfeit Bitcoin. You can not hack it. You do not even store it. So, it can not be stolen. In fact, it is secured by the most powerful supercomputer. This will attract more and more people to Bitcoin.
5- Bitcoin is Borderless and Convenient
You can send Bitcoin to anyone in the world like you can send it to your neighbor. You don't need the permission of any bank or agency. This makes Bitcoin more convenient than Fiat.
6- Bitcoin Is The Best Solution for The Unbanked
Almost two billion people do not have access to banks and similar financial services. Bitcoin can provide an excellent solution for such people.
7- Bitcoin Is The Gateway To The New Economy
A new economy is in the making. No doubt in that. Just look at all those ICOs. If you want to participate in this economy, you need to go through Bitcoin.
8- Bitcoin Is Opening the Door to Innovation
Many new technologies are being built on Bitcoins technology: the blockchain. For example, Factom is building a system on top of Bitcoin where data can be stored securely. This is just an example. People are coming up with more every day. Such innovations only add to Bitcoin's value.
9- Bitcoin Costs a Lot to Mine
Mining Bitcoin is difficult and costly. This means that each Bitcoin we mine stores all that electrical and intellectual energy spent in mining it. Moreover, keeping the distributed ledger has a similar cost too. This means that the value stored in each bitcoin is ever-increasing.
What Do You Think?
This article only summarizes the arguments I found from both sides of the debate. Each one of them should be subjected to critical thinking. Actually, I have my own opinion about them. I will express them in the comments like everyone.
So, which one of these arguments do you agree/disagree with? why? Please let us have a #discussion.
Thank you for summing things up @sadekj. Nice opportunity to comment:
A bubble indeed
Bitcoin is not a bubble
Thank you, @guttormf for the thoughtful comment. It could have been an article itself. 100% upvoted!
Of course, I disagree with some of your points. I will explain my views soon in separate comments. Then I will come back ant reply to your points.
I didn't think it was "of course" that you disagree with me ;-)
Yes.. that is right replace "bitcoin" with cryptocurrency. Bitcoin is intended as a prototype of blockchain technology. It supposed to be developed. Nice point of view :)
As I said in the post. Those arguments are a summary of what I found. They do not express my opinion. I will discuss my opinion here in the comments. To keep it digestible, I will talk about each argument in a separate comment.
I do NOT think Bitcoin is a bubble
I believe the reason that caused most naysayers to criticize Bitcoin is that they are evaluating it based on the assumption of the classical economy. Ironically, Bitcoin is meant to disrupt most of those assumptions!
Maybe this is somewhat true if you consider regular use only. However, if you consider that Bitcoin is the gateway to alt coins and to ICOs and the new economy, then Bitcoin is used a lot.
In addition, many big names are starting to accept Bitcoin as a payment method.
So, maybe speculators are paying an extra for Bitcoin now, but that is because they are seeing a very bright future. They haven't been wrong for 9 years now :)
This is such an arrogant statement. Bitcoin is backed by the people. In fact, the philosophy behind bitcoin is that it should not be under the control of any central government. This is an advantage to BTC not the opposite.
In addition, the accounting side of bitcoin is more secure and transparent than any financial institute.
No, it is not. Its value comes from being a currency and a safe store of value. All currencies are like this.
Whoever says this does not understand Bitcoin. If a user (or an exchange) is hacked, that does not mean that Bitcoin was hacked. This is like saying that the USD can be forged because a theif was able to steal some $ from a not -carfeul person.
Really, people should educate themselves before giving opinions.
You know, it isn't so attractive to vote on your comments when you upvote all of them yourself.
I agree! But This is the only way I know to give them visibility! If I don't do that, they will be burried down and no one would read them. I have spent some good time researching and writing them and I don't want to see them go unnoticed!
Then at least give others time to vote for them first :-)
1- No they would not. I know some governments tried that but most governments are forced to embrace BTC and the blockchain technology. Some of them already declared bitcoin to be legal like Japan. Some are trying to be a blockchain central in their respective are like Bahrain. Some countries are trying to grab a share of the BTC mining pie like Russia.
All These will force neighboring countries to follow. No one wants to be left behind.
No one can deny that BTC was used for illegal activities. However, it is far from the truth that it is only used for that!
The main use of BTC is to buy other cryptocurrencies. However, many new usages are emerging everyday. For example, recently, the real estate sector has been discovering the potential of BTC.
In addition, after BTC has been legalized in Japan, I expect its use their as a regular method will explode soon.
thx bro i upvoted you and wil follow you hope for the same:D i am also a trader investor
Bitcoin can be both a bubble and not a bubble....if more people start treating it as an asset then it moves toward a bubble...if more people treat it as currency then it behave less like a bubble.
That is a good point, @ka82.
In you opinion, what would make people treat it like an asset? and what would make people treat it like a currency?
In countries such as US, Europe and other countries who have "privileges" of better economy bitcoin/crypto are being treated as an asset, which could turn to an speculative bubbles.
At the same time, countries such as Venezuela and Zimbabwe who have economical crises Bitcoin obviously being treated as more like a currency than an asset....
In US people aren't concerned that they get less food with the same money tomorrow, in Venezuela they do.
However there are platforms that coming out that will help people (especially helpful in developed countries) to use their cryptos for generating some economic activities (i.e. using bitcoin as currency), instead of letting sit in their wallet for later price appreciation. Some platform that I know are:
syscoin.org
saltlending.com
Openbazaar.org
Bitcoin is becoming only a trusted store of value. Its cost structure and speed although improving remain behind others. But we need bitcoin to show the world that crypto can be safe and valuable before they dip there toe in the water of the alts "here be monsters" The alts are where I believe the true breakthroughs in utility will come from. Take Steem itself for example. But people have to be able to have trust in something. Stock traders frown down upon bonds but rush to treasuries the moment things get sour. I think that is the roll that Bitcoin is starting to fill as well as being the common gateway from all types of Fiat.
Thank you, @whitesj40.
I agree that: Bitcoin is becoming a trusted store of value. I disagree with the "Only". Bitcoin is becoming more and more popular as a payment method. We are so involved with alt coins, but most people only know bitcoin.
Agreed.